Past, present and future challenges facing the UK - James Smith, Research Director Resolution Foundation HEPI Annual Conference, 13 June 2019
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Past, present and future challenges
facing the UK
James Smith, Research Director
Resolution Foundation
HEPI Annual Conference, 13 June 2019
@resfoundation June 19 1
Challenges from the past (experienced in the present)
@resfoundation 2UK inequality concern is at a 21-year high… Proportion of respondents declaring poverty/inequality to be one of the most important issues facing Britain today Base: representative sample of c.1,000 British adults age 18+ each month, interviewed face-to-face in home. Source: Ipsos MORI Issues Index 3
…and clear that this is a political priority
“We believe in a union not just between the nations of the United Kingdom but
between all of our citizens, every one of us, whoever we are and wherever we’re
from.
That means fighting against the burning injustice that, if you’re born poor, you
will die on average nine years earlier than others…
If you’re from an ordinary working class family, life is much harder than many
people in Westminster realise. You have a job but you don’t always have job Statement from Theresa
security. You have your own home, but you worry about paying a mortgage. You May, Downing Street,
can just about manage but you worry about the cost of living and getting your kids 13 July 2016
into a good school…
I know you’re working around the clock, I know you’re doing your best, and I know
that sometimes life can be a struggle. The government I lead will be driven not by
the interests of the privileged few, but by yours.”
4In some ways things are going well…
Employment rate (16–64): UK
All-time high
Source: RF analysis of ONS, Labour Force Survey
@resfoundation 5…but the key thing to understand is that the Crisis was
different to past recessions
Cumulative growth in real-terms GDP per capita over successive economic cycles: UK
Source: RF analysis of ONS, National Accounts
6This means productivity has hit a brick wall…
Index of output per hour worked, outturn and pre-crisis counterfactual: UK
Source: RF analysis of ONS, National Accounts
7…leading to an unprecedented stagnation in average living
standards
Real average weekly earnings since 2001: UK
Record high
Source: RF analysis of ONS, Labour Market Statistics
@resfoundation 8But UK inequality is high by international standards… measured
before taxes and benefits)
Gini coefficient (1 = perfect inequality, 0 = perfect equality), 2015, disposable income
Source: OECD
9…and wealth inequality is much bigger
Gini coefficient (1 = perfect inequality, 0 = perfect equality) for wealth (GB) and income (UK): 2014-16
Source: RF analysis of ONS, Wealth and Assets Survey and DWP, Households Below Average Income
10Challenges for the future (also experienced in the present)
@resfoundation 11The UK population is ageing…
Dependency ratio (under-20 and 65+ population)/20-64 population
Source: RF analysis of ONS, Annual Survey of Hours and Earnings (1997–2018); ONS, New Earnings Survey (1975–97)
@resfoundation 12This has meant earnings progress for younger generations has
slowed…
Median real hourly employee pay (CPIH-adjusted to 2018 prices), by age and cohort: UK, 1975-2018
Source: RF analysis of ONS, Annual Survey of Hours and Earnings (1997–2018); ONS, New Earnings Survey (1975–97)
@resfoundation 13…meaning young adults now spend less after housing than pensioner households Real equivalised weekly non-housing household consumption, by individual age: UK Notes: Consumption in each detailed spending category in each year is reweighted to figures from the National Accounts (on a per-household, per week basis), to correct for growing under- recording of consumption expenditure in surveys. Consumption is deflated using deflators specific to each spending category. Source: RF analysis of ONS, Living Costs & Food Survey; ONS, Expenditure & Food Survey @resfoundation 14
Our demographic challenges mean there is more of this to come… Historic and projected welfare spend as a proportion of GDP: UK Source: RF analysis of OBR, Fiscal sustainability report – July 2018, July 2018; HMT, Public Expenditure Statistical Analyses; J Hills, Inequality and the State, Oxford University Press, October 2004 @resfoundation 15
Takeaways
• Brexit is all encompassing…
• …but the legacy of the past is an unprecedented stagnation in living
standards;
• This is a macroeconomic phenomenon (don’t give up on macro!);
• Looking ahead, society is ageing…
• …that will dominate policymaking for decades to come.
16Past, present and future challenges
facing the UK
James Smith, Research Director
Resolution Foundation
HEPI Annual Conference, 13 June 2019
@resfoundation June 19 17You can also read
